Parliamentary Watchdog Sees Canada's GDP Flat in Q2

11:40 AM EDT, 06/19/2025 (MT Newswires) -- Canada's real gross domestic product grew by a stronger-than-expected 2.2% in Q1, as firms increased exports and inventories in anticipation of new United States tariffs, said the Parliamentary Budget Officer (PBO) on Thursday.

The PBO, which provides independent advice to parliament, expects that Canada's real GDP will be flat in Q2. Recent data suggest that the Canadian economy slowed in Q2 due to the unwinding of pre-tariff stockpiling and the adverse impact of new U.S. tariffs on exports.

The government's budgetary balance for 2024-25 is estimated to be a deficit of $46.0 billion, or 1.5% of GDP, added the PBO. This is $4.3 billion lower than the watchdog's projection in the 2025 Election Proposal Costing baseline, which didn't include the impact of tariffs or retaliatory measures. The debt-to-GDP ratio is estimated to fall to 41.5% of GDP in 2024-25 from 42.1% in 2023-24.

The government has introduced a new Operating Budget fiscal anchor and committed to balancing this "budget" by 2028-29. It is currently unclear what would be defined as "operating" or "non-operating/capital" spending. As a consequence, PBO added that it is unable to assess whether the government's recent fiscal policy initiatives are consistent with achieving its fiscal objective.

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